Dollar Advances Versus Most Major Peers as Egyptian President Steps Down

By Catarina Saraiva and Allison Bennett - Feb 12, 2011 12:35 AM GMT+0800

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The dollar traded near a one-month high against the yen before a U.S. report forecast to show consumer confidence improved this month, increasing the allure of assets in the world’s largest economy. Photographer: Seokyong Lee/Bloomberg

The dollar rose against most of its major counterparts as Egyptian President Hosni Mubarak stepped down and handed power to the military.

The greenback headed for a third weekly gain versus the euro as Mubarak bowed to the demands of protesters, who are likely to call for immediate elections. Australia’s currency slid below parity with the dollar after Reserve Bank Governor Glenn Stevens said policy makers judged it “sensible” to keepinterest rates on hold. The head of Germany’s central bank resigned, while data showed U.S. consumer confidence rose.

“After the Egyptian announcement, the market quickly realized that there is a lot of uncertainty about who is going to take control, how these elections are going to progress and what the next government is going to look like, so you saw risk aversion quickly return,” said Blake Jespersen, director of foreign exchange in Toronto at Bank of Montreal. “The U.S. dollar is gaining modestly from this.”

The dollar appreciated 0.4 percent to $1.3545 per euro at 11:33 a.m. in New York, from $1.3603 yesterday, when it rallied 1 percent. The greenback has gained 0.3 percent this week against the common currency. The dollar advanced 0.3 percent to 83.46 yen. The euro declined 0.1 percent to 113.07 yen.

“Mubarak has decided to waive the office of the presidency,” said Vice President Omar Suleiman in a statement on state television today. “He has instructed the Supreme Council of the armed forced to take over the affairs of the country.”

Protests in Egypt, inspired by the revolt that ousted Tunisian President Zine El Abidine Ben Ali on Jan. 14, sparked concern that tension would spread in a region that holds more than 50 percent of the world’s known oil reserves.

Weber Resigns

The euro remained lower versus most counterparts as the German government said Bundesbank President Axel Weber will leave office on April 30. The decision takes him out of the race to succeedJean-Claude Trichet as European Central Bank chief when Trichet’s term expires on Oct. 31.

The yen pared its loss against the dollar as yields on U.S. Treasuries extended declines, damping the appeal of dollar- denominated debt. The benchmark 10-year yield fell as much as nine basis points, or 0.09 percentage point, to 3.60 percent

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Canada’s dollar rose against all of its 16 most-traded peers as the nation unexpectedly posted its firsttrade surplus in 10 months and the U.S. trade deficit widened 5.9 percent to $40.6 billion, in line with forecasts. The Canadian currency gained 1 percent to C$1.3411 per euro.

Sweden’s krona slid against the dollar as equities declined, with the OMX Stockholm 30 Index touching to its lowest level since Dec. 1. The krona depreciated as much as 1.3 percent to 6.5423 per dollar, its weakest level since Jan. 31.

Dollar Exchange Gains

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, climbed as much as 0.6 percent to 78.697, the highest level since Jan. 21. The gauge has risen 0.5 percent this week in what would be its first five-day rally since Jan. 7.

“The surprising events in Egypt caused a little bit of a roil in the market,” said Steve Butler, director of foreign- exchange trading in Toronto at Bank of Nova Scotia’s Scotia Capital unit. “We’ve seen the market looking for a little bit of protection and with that, flocking to the U.S. dollar.”

Stocks were little changed after the MSCI World Index fell earlier as much as 0.5 percent and the Standard & Poor’s 500 Index dropped as much as 0.4 percent.

The dollar was poised for a 1.6 percent weekly gain versus the yen, its biggest since Jan. 7.

U.S. Confidence Rises

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 75.1, the highest level since June, from 74.2 in January, in line with the median forecast of economists in a 

Bloomberg News survey.

Australia’s dollar moved below parity with its U.S. counterpart for the first time in almost two weeks, weakening for a third day, as Stevens said in parliamentary committee testimony that there was no urgency to boost borrowing costs in the first half of the year. That led traders to cut bets on the amount rates would be increased over the next 12 months

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“Stevens is leaning toward the dovish side, and that saw the Aussie drop, with his comments taking a rate hike out of the immediate picture,” said Tim Waterer, a foreign-exchange dealer at CMC Markets in Sydney

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Traders lowered their prediction for the amount of interest-rate increases by the Reserve Bank over the next 12 months to 35 basis points from 41 basis points yesterday, according to a Credit Suisse Group AG index based on swaps.

Australia’s currency fell 0.3 percent to $1.0016, from $1.0044. It dropped as much as 0.8 percent to 99.61 U.S. cents, the lowest level since Jan. 31.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net